Moving forward in Zimbabwe - Brooks World Poverty Institute - The ...

Moving forward in Zimbabwe
Reducing poverty and promoting growth
impact of mobiles on economic development comes to eight per
cent of GDP (McKinsey, 2006; Waverman, Meschi and Fuss, 2005).
Empirical evidence from the East African countries of Kenya,
Tanzania and Uganda shows that in 2006, a ten per cent increase in
mobile penetration was estimated to have contributed as much as
1.25 per cent to GDP (Deloitte, 2007). A recent study by Deloitte
and Touche (2007) covering Serbia, Bangladesh, Ukraine, Malaysia,
Thailand and Pakistan found that the contribution of mobile phone
technology to GNP amounted to between 4.5 and six per cent,
and had contributed to the creation of 36,000 jobs (in Serbia) and
244,000 (in Pakistan) (Focus, 2008). Mobiles contributed as much
as 24 per cent of the tax revenue of the countries studied.
In a GSM Association report (2008), it is estimated that for
every dollar invested in the mobile industry in Africa between 2000
and 2012, US$0.80 will be earned as tax revenues by governments,
with more accruing indirectly. The report argues that lower tax will
increase usage and in turn increase revenues, as more people can
afford to be connected. It is further argued (Hausman, 1997) that
the ‘dead weight’ loss caused by mobile taxation is likely to be more
significant when demand is relatively elastic, and when industry has
relatively high fixed costs and relatively low marginal costs. Quite
clearly, a case can be made for the growth-enhancing potential of
telephony and ICTs in general. A key question, however, is whether
this growth generated by ICTs and telephony can be linked to
poverty reduction efforts in post-crisis Zimbabwe.
Telecommunications and poverty alleviation
There have been studies done to find out if an increase in
teledensity (i.e. more access to telecommunications per 100 people)
is pro-poor in terms of its growth impacts (Forestier et al, 2002).
Cross-country evidence suggests that, prior to the internet (and
to mobiles) increased teledensity in fact led to greater inequality.
However, emerging evidence indicates that newer technologies
such as the internet and mobile phones can be a source of growth
that diminishes income inequality, if appropriate policies are put
in place for harnessing these technologies for the common good.
This finding reinforces the important role of policy frameworks
and regulatory regimes that focus on the big picture and place
the sector’s development within the macro-economic and social
development sphere.
A Socio-Economic Impact of Mobiles (SIM) project
launched by Vodafone in 2004 tracked these benefits through
research conducted in Kenya, Tanzania, South Africa and Egypt.
The project found three broad categories of benefits the poor
may receive. Firstly, mobiles offer incremental benefits, through
enabling people to be more efficient in whatever they have already
been doing. Fishermen in Kerala in India were able to coordinate
supply and demand for their catch and respond more efficiently to
market demand, thus reducing waste and minimising the risk and
uncertainty of the market (Abraham, 2007). Fishermen’s profits went
up by eight per cent and consumer prices went down by four per
cent, thus benefiting both the producer and the consumer (Jensen,
2007). In Kenya, the Kenya Agricultural Commodity Exchange
(KACE) provides prices to farmers through text messages, enabling
them to decide whether or not to deliver, where and when to do
so, and often avoiding costly trips. Mobiles have enabled traders
to overcome the challenges associated with physical distances, and
lack of information. Studies in Tanzania found mobiles obviate
the need to travel long distances to look for employment, enabled
friends and relatives to keep in touch and enabled access to health
and emergency services (Vodafone, 2004).
Secondly, there are transformational benefits, through new
and innovative offerings that unlock opportunities that were
not previously available. The most celebrated of such benefits is
mobile banking (m-banking), which has enabled many rural people
who have never had a bank account to access micro-financing,
receive money remitted from their relatives in the cities, and to pay
for goods and services without the need to travel or carry cash.
Successful mobile banking projects in Africa have been undertaken
in South Africa (WIZZIT) and Kenya (M-Pesa). There is now a
stampede by operators to join this growing market.
The third cluster of benefits is production benefits, resulting
from the creation of new livelihoods. The selling of phone cards and
airtime is a common sight in Africa, and many small businesses sell
second-hand mobile phones. These activities generate thousands of
jobs (ID21, 2007; ODI, 2009). Mobiles have also created business
opportunities, and increased profits for small traders in Egypt and
South Africa. A review of the social and economic development
impact of the Grameen Village Phone Program in Bangladesh
established that incomes for phones operators averaged between
24 and 40 per cent of household incomes, and left the owners
socially and economically empowered (Richardson et al, 2000).
Up to a quarter of a million people in Bangladesh depend on the
mobile industry for a living, either directly or indirectly.
The success of any technology or innovation is judged by
its rate of adoption (Agarwal and Prasad, 1998). If we use this
measure to assess the benefits of mobile technology, it can be said
to have passed the test of acceptance in the developing world,
particularly in Africa.
Mobiles and financial services: mobile banking and
remittances
One transformational and developmental feature of mobile phones
has been giving the poor access to financial services to which they
would not have otherwise had access. Access to financial services
can be seen as a public good and is important in enabling people
to participate in the modern, market-based economy (Arun and
Hulme, 2008). It is therefore a tool for social and economic inclusion
and an important component of poverty alleviation. Demand for
financial services in Africa is high, despite the low levels of income
(UNCTAD, 2007b: 19), and research has shown that both the poor
and rural people have the desire to save and will do so, given the
opportunity (de Soto, 2000). The main reasons for the poor not
having bank accounts is the unavailability of banking networks
(due to the prohibitive costs for banks to open outlets in far-flung
places) and the fragmented and segmented structure of the financial
sector in Africa. Other reasons include high transaction costs and
stringent formalities for opening an account (Ivatury and Pickens
2006). Mobile banking brings all the benefits of a formal bank,
minus the hassles and the costs, plus the advantage of mobility.
Globally there is a huge potential market for mobile banking.
Only one billion of the world’s 6.5 billion people have bank
accounts, yet there are now more than four billion mobile phones.
The World Bank estimates that in many developing countries,
over half the population has never had a bank account. The
Consultative Group to Assist the Poor estimates that 80 per cent
of the population in UN-designated least developed countries have
no access to banking (CGAP, 2009). It is also estimated that only
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